The S&P/ASX 200 is expected to open slightly lower on Monday, following a solid 1.6% gain last week — its strongest weekly performance in more than a month.
ASX futures were down 12 points, or 0.1%, to 8,768 near 6am AEST, pointing to a subdued start to the new trading week after recent gains.
Despite last week’s rally, the Australian market continues to lag global peers. The ASX 200 has gained 7.4% so far in 2025, trailing major offshore markets that are tracking toward double-digit annual returns.
Wall Street pauses near record highs
The softer local lead followed a quiet end to the week on Wall Street. The S&P 500 and Dow Jones Industrial Average finished little changed on Friday, while the Nasdaq 100 slipped 0.1%.
Even so, US equities remain close to record territory. All three major indices are ending the year near historic highs and remain on track to post strong gains for 2025, supported by resilient corporate earnings and sustained investor interest in technology and artificial intelligence-related stocks.
For the holiday-shortened week, the S&P 500 gained about 2.3%, while the Dow rose roughly 1.6% and the Nasdaq Composite advanced 2.5%.
Rate outlook and Fed leadership in spotlight
Monetary policy expectations remain a key driver for markets. Federal Reserve chair Jerome Powell’s term ends in May, with US President Donald Trump expected to nominate a successor early in the new year.
The Fed cut interest rates earlier this month but signalled a pause after delivering three consecutive reductions, citing the need to assess labour market conditions. Markets are currently pricing in at least two further rate cuts next year, with a 57 per cent probability of a move in March.
Ray Attrill, head of FX strategy at National Australia Bank, said a leadership change could influence policy direction. “When we get the new chair, the Fed is going to have a more dovish disposition than the outgoing Jerome Powell,” he said.
Lower interest rates tend to support gold and silver prices, as reduced bond yields increase the appeal of non-yielding assets during periods of economic uncertainty.
Precious metals in focus as tensions rise
Locally, attention may turn to the resources sector, with mining stocks expected to benefit after gold and silver hit fresh highs over the weekend.
The move into precious metals followed heightened geopolitical tensions after US airstrikes against Islamic State militants in Nigeria, prompting renewed demand for safe-haven assets.
Silver has been a standout performer over the past year, surging 174% to a record high of US$79.11 per ounce. The rally has been driven by a combination of global supply shortages and silver’s growing strategic importance.
The metal has recently been designated a critical mineral in the United States and plays a key role in a range of industries, including jewellery, medical devices, electric vehicles and solar panels. According to Citi, the solar industry now consumes close to 30% of annual global silver supply from both mining and recycling.
US data to guide thin holiday trade
With no major economic data due in Australia this week, investors are likely to take their cues from offshore developments.
In the US, attention will be on the release of the Federal Reserve’s December meeting minutes on Wednesday, along with labour market data, including initial jobless claims expected to edge up to around 215,000.
Wall Street is entering another quiet holiday week, with trading volumes expected to remain thin around the New Year period.
Cautious optimism heading into 2026
Looking ahead, fund managers expect the Australian market to drift higher but remain relatively subdued. Hugh Dive, chief investment officer at Atlas Funds Management, said January typically brings modest gains. “The US sharemarkets are likely to be positive in January, and we’ll probably follow them as we have low trading volumes,” he said.
While global markets continue to benefit from strong momentum and hopes of easing monetary policy, investors remain mindful of elevated valuations, geopolitical risks and uneven economic growth — setting the tone for a cautiously optimistic start to 2026.